{"id":1201303,"date":"2020-08-11T15:13:28","date_gmt":"2020-08-11T20:13:28","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=109564"},"modified":"2020-08-11T15:13:28","modified_gmt":"2020-08-11T20:13:28","slug":"heres-what-the-stimulus-plan-stimulated","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1201303","title":{"rendered":"Here\u2019s What the \u201cStimulus Plan\u201d Stimulated"},"content":{"rendered":"

This post Here\u2019s What the \u201cStimulus Plan\u201d Stimulated<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

What did the \u201cstimulus plan\u201d stimulate?<\/p>\n

This is the pressing question of economist Alan Reynolds.<\/p>\n

The stimulus has not stimulated the economy\u2026 as demonstrated by second-quarter GDP.<\/p>\n

The answer is obvious, says Mr. Reynolds, answering his own question. The stimulus stimulated government:<\/p>\n

\n

The answer is obvious. Federal nondefense spending rose at a 39.7% annual rate. Big government spending can and does grow big government.<\/i><\/p>\n<\/blockquote>\n

The fellow rings dead center. Big government spending can and does grow big government.<\/p>\n

Meantime, loads more spending is on tap \u2014 depend on it. That is, loads more government is on tap.<\/p>\n

The U.S. Government\u2019s \u201cExorbitant Privilege\u201d<\/b><\/h2>\n

Governments incline naturally to spending, as governments incline naturally to roguery, crookery and rascality.<\/p>\n

The United States government tilts so steeply in spending\u2019s direction\u2026 it risks going over.<\/p>\n

The entire creaking edifice rests upon a quicksand foundation of debt.<\/p>\n

Most governments are limited in the amount of de\u200cbt they can pile up. Thus, they are limited in the swinishness they can get up to.<\/p>\n

But the United States government is unlike most governments. For it enjoys the \u201cexorbitant privilege.\u201d<\/p>\n

That is, the United States fields the world\u2019s premier reserve currency. And the world runs a bottomless appetite for its dollars.<\/p>\n

The United States can therefore run the presses at a clip truly astonishing.<\/p>\n

And despite America\u2019s heroic go at the print press, its debt has never cost less…<\/p>\n

A Moth to the Flame<\/b><\/h2>\n

Present yields on its 10-year Treasury bond scrape along at a vanishing 0.64%. Yields on its 30-year Treasury \u2014 at 1.33% \u2014 run scarcely higher. Given these rates\u2026<\/p>\n

The United States government can no more resist de\u200cbt\u2019s seductions than a cat can resist catnip, a bee can resist honey\u2026 or a moth can resist flame.<\/p>\n

The flame is drawing the United States in, surely, inexorably, relentlessly.<\/p>\n

Here is the largest trouble with its government de\u200cbt:<\/p>\n

It is largely unproductive. <\/i>It is a millstone about the neck…<\/p>\n

Keynes\u2019 Warning<\/b><\/h2>\n

During the Great Depression, John Maynard Keynes \u2014 later Lord John Maynard Keynes \u2014 put his general theory into general circulation.<\/p>\n

Deficit spending can revive the animal spirits, said he, set industry\u2019s idle machinery awhir\u2026 and put the economy back on the jump.<\/p>\n

Yet he wagged a stern finger, and warned:<\/p>\n

Deficit spending is not an open-ended warrant for government extravagance.<\/p>\n

Keynes insisted each dollar of de\u200cbt must pack economic oomph. That is, each dollar of de\u200cbt must yield more than it cost. Else it does not stimulate.<\/p>\n

As Mr. Lance Roberts of Real Inves\u200ctment Advice reminds us:<\/p>\n

\n

John Maynard Keynes\u2019 was correct in his theory that in order for government \u201cdeficit\u201d spending to be effective, the \u201cpayback\u201d from investments being made through de\u200cbt must yield a higher rate of return than the de\u200cbt used to fund it.<\/i><\/p>\n<\/blockquote>\n

But the vast majority of United States government spending fails Lord Keynes\u2019 exacting test…<\/p>\n

Government Debt Sedates, Not Stimulates<\/b><\/h2>\n

The lion\u2019s take of United States government borrowings go to \u201csocial welfare.\u201d And to service existing de\u200cbt.<\/p>\n

That is, it goes largely to non-productive uses. Thus, it sedates and depresses \u2014 not stimulates. Roberts:<\/p>\n

\n

As this money is used for servicing de\u200cbt, entitlements, and welfare, instead of productive endeavors, there is no question that high de\u200cbt-to-GDP ratios reduce economic prosperity over time. In turn, the Government tries to fix the \u201ceconomic problem\u201d by adding on more \u201cde\u200cbt.\u201d<\/i><\/p>\n<\/blockquote>\n

And so the \u201ceconomic problem\u201d deepens and deepens.<\/p>\n

We recognize the lockdowns are unique economic catastrophes that bloated government spending. Yet they merely amplified existing trends.<\/p>\n

It is easy to indict the poor fiscal management of the politician. Nothing is easier in fact.<\/p>\n

But if we haul the politician into the dock\u2026 We The People must go with him\u2026<\/p>\n

\u201cGive Me!\u201d<\/b><\/h2>\n

\u201cKick the bums out\u201d is the voter\u2019s eternal bellow.<\/p>\n

But politicians are as they are\u2026 because We the People are as We are.<\/p>\n

We demand a shining military machine with every whistle and bell. Heaping rations of Social Security and Medicare. A Rolls-Royce education. A million gaudy baubles.<\/p>\n

But we do not wish to pay full freight.<\/p>\n

\u201cHand it over,\u201d we bark out one corner of our mouth. \u201cBut do not dare raise our taxes,\u201d we belch out the other.<\/p>\n

Let the politician take an honest man\u2019s attitude before the American public\u2026<\/p>\n

Let him tell us we can have A. Or we can have B.<\/p>\n

But we cannot have A and B \u2014 and certainly not C.<\/p>\n

Not without paying for it, that is.<\/p>\n

Then observe the hard rain of rotting eggs concentrating upon his head.<\/p>\n

10 times of the 10, we yank the lever for the silver tongue who tickles our ears with false but pleasing promises.<\/p>\n

Doing for Your Country? Or Your Country Doing for You?<\/b><\/h2>\n

Half the country collars more in government transfer payments than it ladles out in taxes.<\/p>\n

Is this the model of civic virtue? Is this Kennedy\u2019s doing for our country\u2026 or our country doing for us?<\/p>\n

If doing for our country, it is a strange service indeed.<\/p>\n

Many of us insist we are heart and soul for limited government.<\/p>\n

But we are heart and soul for limited government\u2026 as long as it is the other fellow\u2019s heart and soul feeling the blade.<\/p>\n

Democracy in Action<\/b><\/h2>\n

\u201cGive me that tax break,\u201d says the one. \u201cNo, give it to me,\u201d says the other.<\/p>\n

\u201cYou can both go scratching,\u201d says the third. \u201cI deserve it more.\u201d<\/p>\n

A fourth files a claim of his own.<\/p>\n

Meantime, the hard-luck farmer wants his back scratched. The hard-pressed businessman wants his belly rubbed. The overlabored teacher wants her apple.<\/p>\n

And millions more are alert to opportunity\u2026<\/p>\n

All striving to work the angles, to get a bucket in the stream, to get a snout in the trough, to catch a penny.<\/p>\n

It is the evil of \u201cspecial interests\u201d when the other fellow gets his. But it is \u201cdemocracy in action\u201d when it butters our own parsnips.<\/p>\n

We do not exempt ourselves from criticism of course. We enjoy having our parsnips buttered as much as the fellow next door to us.<\/p>\n

\u201cEvery Nation Gets the Government It Deserves\u201d<\/b><\/h2>\n

Were the American people humbugged into so much debt? Or have we freely and knowingly put our names on the contract?<\/p>\n

As we have argued before, two possibilities suggest themselves:<\/p>\n

1) The elected officials of the United States are colossal rogues. They have amassed today\u2019s $26.6 trillion debt in abject defiance of the thrifty American voter.<\/p>\n

Or:<\/p>\n

2) The $26.6 trillion debt reflects faithfully the desires of the American voter. He has gotten what he wants. He believes he is getting value for money.<\/p>\n

Option one mocks our cherished democratic theories. Option two stands in full indictment of them.<\/p>\n

\u201cEvery nation gets the government it deserves,\u201d said 18th-century French philosopher Joseph de Maistre.<\/p>\n

The American nation is of course no exception.<\/p>\n

Franklin\u2019s Warning<\/b><\/h2>\n

What does it mean for the future of our beloved American Republic?<\/p>\n

Warned Mr. Benjamin Franklin long ago:<\/p>\n

\u201cWhen the people find that they can vote themselves money that will herald the end of the republic.\u201d<\/p>\n

Just so. Yet still the circus goes on, entertaining as ever, paraded out daily in at least a dozen rings\u2026<\/p>\n

The frauds, the sweet lies, the charming delusions of democracy…<\/p>\n

The great warfare of factions, the thundering collision of interests, each fellow trying to get it over on the next\u2026<\/p>\n

Pity the poor politician who has to referee and score the bout.<\/p>\n

He cannot please us all. Yet he tries.<\/p>\n

So today we lift a modest hymn of sympathy for the poor, fimble-fambling politician.<\/p>\n

He is a man in an impossible fix.<\/p>\n

Perhaps the arch-villain of our tale is not this politician \u2014 but We the People.<\/p>\n

Regards,<\/p>\n

\"Brian<\/p>\n

Brian Maher
\nManaging Editor, The Daily Reckoning<\/i><\/p>\n

The post Here\u2019s What the \u201cStimulus Plan\u201d Stimulated<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post Here’s What the “Stimulus Plan” Stimulated<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

“Governments incline naturally to spending, as governments incline naturally to roguery, crookery and rascality”…<\/p>\n

The post Here’s What the “Stimulus Plan” Stimulated<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[484,3884,3724,366,656,4538,463],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1201303"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1201303"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1201303\/revisions"}],"predecessor-version":[{"id":1201304,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1201303\/revisions\/1201304"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1201303"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1201303"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1201303"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}